_Life Insurance Presentation.pptx
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LIFE INSURANCE Group Research Notes © 2020 Business Boss. All Rights Reserved. What is life insurance? Life insurance is a contract between you and a company. In exchange for regular payments to the company, it pays out money upon your death. The parties that receive the death benefit, typically fam...
LIFE INSURANCE Group Research Notes © 2020 Business Boss. All Rights Reserved. What is life insurance? Life insurance is a contract between you and a company. In exchange for regular payments to the company, it pays out money upon your death. The parties that receive the death benefit, typically family members, are called beneficiaries. How does life insurance work? When you die due to a sickness or injury, the insurance company will pay the amount specified in your plan to the beneficiaries that you picked. While this is a sensitive subject, it’s important to know that many companies will not honor a life insurance policy if the policy holder commits suicide. There are two main categories: – Term Life Insurance – Permanent/Whole Life Insurance Who needs life insurance? Anybody who has others depending on their income needs life insurance. The thought is that if you die, the people depending on your income will still need money to pay for your funeral and continue their way of living for a while as they reassess their financial situations. How much life insurance do you need? As you’re considering a life insurance policy, think about the amount of money that the people you would be leaving behind would need. Do you want to just cover the cost of your funeral, or do you want to help provide for your remaining family members to allow them live the lifestyle they have become accustomed to. Consider sports, mortgage/rent, schooling, bills, etc. Types of Life Insurance: TERM LIFE Term life insurance lasts for a period of time defined at purchase. Policies commonly cover 10-, 20- or even 30-year periods. If you die during the covered period, the policy will pay your beneficiaries the fixed amount stated in the policy. If you don’t die during that time frame, no one gets paid and the policy ends. Term life is popular because it offers large payouts at a far lower cost than permanent life. It’s also a temporary solution. Someone may pick this option while they’re younger because they don’t want to pay as much, they have a mortgage, or they have young children they’re worried about. Types of Life Insurance: GROUP LIFE Many careers provide their employees with a group life insurance policy. This is normally a type of term life insurance. It’s a cheap policy that employers can provide to their employees as an added benefit. The coverage normally isn’t that much and you have to be working for that employer to get it. If you quit your job, you no longer have that coverage. While this is a great benefit, the policy is normally for a low amount that probably won’t cover all of the expenses that you’re wanting it to, so shopping for another policy on your own is a great choice. Types of Life Insurance: PERMANENT LIFE Permanent life insurance covers you until death, assuming you pay your premiums. Versions of permanent life: – whole life insurance – universal life – variable life Permanent life insurance policies build cash value as they age. A portion of the premium payments is added to a cash account, which can earn interest or be invested, depending on the type of policy you hold. Types of Life Insurance: WHOLE LIFE Whole life policies cost more than term life policies. It’s easy to overspend. The younger you begin your whole life policy, the better price you’re going to get. As years pass and you have continuously paid into the policy, the death payout amount normally increases. You can also withdraw money that you’ve put into the policy if you needed to, however this decreases the value of your policy. Some whole life policies can be “paid up” in which you pay for a set amount of years and when you reach that time, you’re still covered but you don’t have to pay in more. If you’re looking for an “investment” then a good retirement account like a 401-K is a better option. Types of Life Insurance: UNIVERSAL LIFE Universal life is a type of permanent life insurance. It can be more flexible in cost because you have more say in what your payments are depending on your finances. The money is invested. If the investments do well, you don’t have to pay in as much. If the investments don’t do well, you’ll need to pay in more. Types of Life Insurance: VARIABLE LIFE Variable life is another permanent life insurance policy in which your money is tied to investments. The difference in variable life is that your premium is fixed and get to pick what those investments are. – This means that the monthly charge you pay for the policy won’t change. – If you pick investments that don’t perform well, you won’t have an increase in coverage. Types of Life Insurance: GUARANTEED LIFE Guaranteed issue life insurance is a great option for older people or those who may have a sickness. When you get a guaranteed life policy, there aren’t questions about your health. It’s a good option when you’ve waited too long to get a policy and the other policy prices are too high for your liking. The trade is that you will still be paying a higher amount of money than if you shopped for a policy when you were younger and your payout amounts won’t be as high as it would be with a different policy type. Cost of Life Insurance The cost of a person’s life insurance policy depends on multiple risk factors. – Age – Health issues – Activity interests (knitting vs skydiving) – Tobacco use If you pose a higher risk, you’re seen as someone who could die quickly and actually need to use the money from the policy so you will have to pay more. Lying about any of these factors in effort to get a better price could void your policy altogether meaning your beneficiaries won’t get their money. An insurance company also reserves the right to look into your death and health records to make sure no foul play occurred. After You Die… Creating a Will A will is a legal document that states your wishes regarding the distribution of your property and the care of any minor children. – Your property can be actual land, houses, cars, items such as technology or art, bank accounts, cash, etc. You decide who you want to have separate items that you own and who you want your children to go to. (You can leave your items to a charity if you want!) When you’re younger you can create a will yourself. As you get older and have more possessions, money, and children you’ll want to meet with a lawyer to be sure your will is legally binding and will hold up in court without family members trying to change it. If you die and you don’t have a will, each state has a plan as to what they will do with your assets and/or children.
